A recent divergence between the Euro futures contract and the US dollar index is just one piece of evidence suggesting that the EURUSD has reversed course. Additional evidence includes a long term cycle, wave structure at multiple degrees of trend, and recent momentum considerations.
Market turns almost always occur with divergence. The most commonly recognized divergence is momentum (such as RSI) divergence whereas a new high is not confirmed by a new high in momentum and vice versa. A different kind of divergence occurs when similar markets fail to confirm new highs or lows. Equity technicians watch the Dow Industrial average and the Dow Transportation average at potential turning points. If one index fails to confirm the other’s new high or low, then the probability of a reversal is increased. This dynamic has occurred on 3 occasions since mid 2008*.
July 2008: Euro trades above prior high set in April 2008 but USD index fails to drop below April 2008 low - USD bullish reversal
March 2009: USD index trades above prior high set in November 2008 but Euro fails to drop below November 2008 low - USD bearish reversal
Now: USD index trades below prior low set in December 2008 but Euro fails to exceed its December 2008 high - USD bullish reversal?
*there have been other instances of this divergence, but I am only showing the most recent instances in this report
This is a chart that I have shown numerous times over the last year. It is important to keep in mind how important a USD turn may have occurred at 1.6000. Since the end of the Bretton Woods era, the EURUSD (DEM rates are used before 1998) exchange rate has exhibited a long term rhythm of roughly a decade up and six years down. If the rhythm holds, then the EURUSD is in a multi-year bear market. Wave structure is in agreement with the roughly 10 year up / 6 year down sequence. While not perfect (what real life wave count is perfect?), the decline from 1.6000 is characteristic of an impulse (wave 5 truncated). Given the amount of time that the consolidation since has consumed, there is little doubt that everything since October 2008 is a correction. Although some may have qualms with labeling the rally from 1.2454 as a truncated wave C, there is strong evidence that this is the correct interpretation. The rally from 1.2454 is a clear 5 wave affair (C waves are in 5 waves). Wave v of C is a diagonal with a textbook throwover (in which price exceeds the top diagonal line before reversing). RSI divergence is present at the recent high as well. A view of the weekly chart will show that last week’s price action traced out a key reversal. Sentiment figures, including COT data, warn of a turn. On a weekly closing basis, last week’s high is over 250 pips higher than the December high. On a daily closing basis, last week’s high is just several pips shy of the December high. This may be explained by the lack of liquidity that is common in December.
Finally, the short term pattern confirms the bigger picture bearish view. The decline from 1.4452 is in 5 waves and 5 wave moves occur in the direction of the larger trend. One more low (below 1.4103) may be required in order to complete the decline from 1.4452 but a correction; back to at least 1.4223 and possibly 1.4300 will present an opportunity to sell the EURUSD with a stop above 1.4452.
Jamie Saettele publishes Daily Technicals every weekday morning (930 am EST), COT analysis (published Monday mornings), technical analysis of currency crosses throughout the week (EUR on Tuesday, JPY on Wednesday, GBP on Thursday, AUD on Friday), and the DFX Trend Index every day after the NY close. He is also the author of Sentiment in the Forex Market. Follow his intraday market commentary at DailyFX Forex Stream.
Tuesday, September 8, 2009
TREASURY AUCTION
Treasuries Gain Prior to Three-Year Note Auction, Fed Meeting
Treasuries rose for a second day before a record $37 billion auction of three-year notes and as the Federal Reserve meets to discuss interest rates and its asset purchase program.
Ten-year notes gained yesterday for the first time in six days before the first of three debt auctions this week totaling $75 billion, the largest quarterly refunding to date. U.S. stock-index futures declined. The Federal Open Market Committee will keep its key lending rate between zero and 0.25 percent, according to all 45 economists surveyed by Bloomberg. The Fed may also decide whether to extend its $300 billion Treasury purchase plan.
“We’ve been able to sustain a bit of a bid today as yields are still attractive,” said Martin Mitchell, head of government-bond trading at the Baltimore unit of Stifel Nicolaus & Co. “There is a general feeling that the refunding will go well, and there are no surprises expected out of the FOMC meeting.”
The yield on the 10-year note fell three basis points, or 0.03 percentage point, to 3.75 percent at 9:05 a.m. in New York, according to BGCantor Market Data. The 3.125 percent security maturing in May 2019 rose 7/32, or $2.19 per $1,000 face amount, to 94 31/32.
The U.S. government plans to sell $23 billion of 10-year notes tomorrow and $15 billion of 30-year bonds on Aug. 13. President Barack Obama has boosted marketable U.S. debt to a record $6.78 trillion to stimulate the economy and service deficits.
Three-Year Notes
The three-year notes being sold today yielded 1.84 percent in pre-auction trading. The securities drew a yield of 1.519 percent at the last sale, on July 7, when investors bid for 2.62 times the amount of debt offered, compared with 2.82 at the June auction.
Indirect bidders, an investor class includes foreign central banks, bought 54 percent of the notes in July after purchasing 43.8 percent in the prior auction.
Ten-year yields surged 37 basis points last week, the most since 2003, as better-than-estimated employment, home-sales and manufacturing data boosted confidence that the U.S. economy is recovering from the worst slump since the Great Depression.
Fed policy makers meeting today are likely to discuss the purchases and other quantitative-easing measures, which include buying $1.45 trillion in mortgage-related securities, designed to drag the economy out of the recession.
“Policy makers at the FOMC will probably express more optimism about growth and no change to the quantitative easing program,” said Alex Li, an interest-rate strategist in New York at Credit Suisse Securities USA LLC, one of the 18 primary dealers that trade with the Fed.
The central bank is scheduled to purchase Treasuries due from August 2026 to May 2039 today. It said in March it would buy as much as $300 billion of government securities over six months to cap consumer borrowing costs.
Productivity
The productivity of U.S. workers grew at an annual 6.4 percent pace in the second quarter, more than forecast, after a 0.3 percent gain in the prior three months, Labor Department data showed today in Washington.
The difference between rates on 10-year notes and Treasury Inflation Protected Securities, or TIPS, which reflects the outlook among traders for consumer prices, widened to 1.95 percentage points, from near zero at the end of 2008. The spread has averaged 2.20 percentage points for the past five years.
With the Fed on target to complete the planned purchase of $300 billion of Treasuries in September, the exit of this year’s biggest buyer is unlikely to raise yields by depressing prices, the world’s largest bondholders say.
Counterproductive
The market for TIPS shows traders expect inflation over the next 10 years to average 1.96 percent, which is 0.74 percentage points less than the past decade’s average and too little to erase the value of bonds’ fixed payments.
“At this stage it would probably be counterproductive for the Fed to extend this program,” said Mihir Worah, who oversees the $14 billion Real Return Fund for Pacific Investment Management Co. in Newport Beach, California. “The market does not want it to be continued” because an expansion would renew concerns that money printed to fund it would fuel inflation, he said.
Treasuries handed investors a loss of 5 percent this year, while U.S. corporate bonds returned 18 percent, according to Merrill Lynch
Treasuries rose for a second day before a record $37 billion auction of three-year notes and as the Federal Reserve meets to discuss interest rates and its asset purchase program.
Ten-year notes gained yesterday for the first time in six days before the first of three debt auctions this week totaling $75 billion, the largest quarterly refunding to date. U.S. stock-index futures declined. The Federal Open Market Committee will keep its key lending rate between zero and 0.25 percent, according to all 45 economists surveyed by Bloomberg. The Fed may also decide whether to extend its $300 billion Treasury purchase plan.
“We’ve been able to sustain a bit of a bid today as yields are still attractive,” said Martin Mitchell, head of government-bond trading at the Baltimore unit of Stifel Nicolaus & Co. “There is a general feeling that the refunding will go well, and there are no surprises expected out of the FOMC meeting.”
The yield on the 10-year note fell three basis points, or 0.03 percentage point, to 3.75 percent at 9:05 a.m. in New York, according to BGCantor Market Data. The 3.125 percent security maturing in May 2019 rose 7/32, or $2.19 per $1,000 face amount, to 94 31/32.
The U.S. government plans to sell $23 billion of 10-year notes tomorrow and $15 billion of 30-year bonds on Aug. 13. President Barack Obama has boosted marketable U.S. debt to a record $6.78 trillion to stimulate the economy and service deficits.
Three-Year Notes
The three-year notes being sold today yielded 1.84 percent in pre-auction trading. The securities drew a yield of 1.519 percent at the last sale, on July 7, when investors bid for 2.62 times the amount of debt offered, compared with 2.82 at the June auction.
Indirect bidders, an investor class includes foreign central banks, bought 54 percent of the notes in July after purchasing 43.8 percent in the prior auction.
Ten-year yields surged 37 basis points last week, the most since 2003, as better-than-estimated employment, home-sales and manufacturing data boosted confidence that the U.S. economy is recovering from the worst slump since the Great Depression.
Fed policy makers meeting today are likely to discuss the purchases and other quantitative-easing measures, which include buying $1.45 trillion in mortgage-related securities, designed to drag the economy out of the recession.
“Policy makers at the FOMC will probably express more optimism about growth and no change to the quantitative easing program,” said Alex Li, an interest-rate strategist in New York at Credit Suisse Securities USA LLC, one of the 18 primary dealers that trade with the Fed.
The central bank is scheduled to purchase Treasuries due from August 2026 to May 2039 today. It said in March it would buy as much as $300 billion of government securities over six months to cap consumer borrowing costs.
Productivity
The productivity of U.S. workers grew at an annual 6.4 percent pace in the second quarter, more than forecast, after a 0.3 percent gain in the prior three months, Labor Department data showed today in Washington.
The difference between rates on 10-year notes and Treasury Inflation Protected Securities, or TIPS, which reflects the outlook among traders for consumer prices, widened to 1.95 percentage points, from near zero at the end of 2008. The spread has averaged 2.20 percentage points for the past five years.
With the Fed on target to complete the planned purchase of $300 billion of Treasuries in September, the exit of this year’s biggest buyer is unlikely to raise yields by depressing prices, the world’s largest bondholders say.
Counterproductive
The market for TIPS shows traders expect inflation over the next 10 years to average 1.96 percent, which is 0.74 percentage points less than the past decade’s average and too little to erase the value of bonds’ fixed payments.
“At this stage it would probably be counterproductive for the Fed to extend this program,” said Mihir Worah, who oversees the $14 billion Real Return Fund for Pacific Investment Management Co. in Newport Beach, California. “The market does not want it to be continued” because an expansion would renew concerns that money printed to fund it would fuel inflation, he said.
Treasuries handed investors a loss of 5 percent this year, while U.S. corporate bonds returned 18 percent, according to Merrill Lynch
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International Insurance is the premier online site for international health insurance and international travel health insurance plans, offering a broad range of plans that provide comprehensive yet affordable international insurance coverage for around the world. If you need any assistance in your search for international insurance please do not hesitate to contact our customer support team who will be happy to assist you.
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When you travel around the world, you need to make sure you have the right travel insurance in place to protect you from the unexpected. Whether you are traveling for a short trip, or an extended world tour we have a range of international travel insurance plans that provide full coverage from 5 days up to 1 year (with renewability up to 3 years), plus a range of trip cancellation, emergency evacuation insurance and extreme sports insurance plans.
International Health Insurance
If you plan to be residing outside of your home country for more than a year, we have a range of international health insurance plans that are specifically designed to offer world class health insurance benefits. We have 3 main plans that provide coverage from a basic health insurance plan for those on a budget, right up to the Platinum plan that provides coverage for those who require the very best plan money can buy.
International Student Insurance
We offer a range of study abroad insurance and international student insurance plan that are designed specifically for students, offering great benefits and at a great price. All the plans we offer will meet and exceed the USA State Department Student Insurance guidelines, plus the plans will meet and exceed most insurance guidelines around the world. Plans are available from 5 days up to 1 year, plus longer term annual coverage.
International Group Insurance
For groups of 5 or more, we can offer a range of plans that offer discounted prices and better benefits than our standard individual plans. Our group plans are ideal for student groups, international employee groups, travel groups and much more. All our group plans are tailor made to your needs and wants, so please learn more about what we can offer and let our team provide a personalized quotation for you.
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International Association of Insurance Supervisors
Welcome to the website of the International Association of Insurance Supervisors (IAIS). Established in 1994, the IAIS represents insurance regulators and supervisors of some 190 jurisdictions in nearly 140 countries, constituting 97% of the world's insurance premiums. It also has more than 120 observers. Its objectives are to:
Cooperate to contribute to improved supervision of the insurance industry on a domestic as well as on an international level in order to maintain efficient, fair, safe and stable insurance markets for the benefit and protection of policyholders
Promote the development of well-regulated insurance markets
Contribute to global financial stability
This website is designed to provide you with an overview of the activities of the IAIS and give you access to its publications
Welcome to the website of the International Association of Insurance Supervisors (IAIS). Established in 1994, the IAIS represents insurance regulators and supervisors of some 190 jurisdictions in nearly 140 countries, constituting 97% of the world's insurance premiums. It also has more than 120 observers. Its objectives are to:
Cooperate to contribute to improved supervision of the insurance industry on a domestic as well as on an international level in order to maintain efficient, fair, safe and stable insurance markets for the benefit and protection of policyholders
Promote the development of well-regulated insurance markets
Contribute to global financial stability
This website is designed to provide you with an overview of the activities of the IAIS and give you access to its publications
Monday, September 7, 2009
FOREX PROS
But one of the main FOREX pros is margin. In this market, a trader's money can play with 5-times as much value of product as a futures trader's, or 50 times more than a stock trader's.
Just like futures and stock speculation, a FOREX trader has the ability to control a large amount of currency by putting up a small amount of margin. However, the margin requirements that are needed for trading futures are usually around 5% of the full value of the holding, or 50% of the total value if you are trading stocks. One of the FOREX pros is the margin requirements for FOREX are about 1%. For example, the margin required to trade foreign exchange is $1000 for every $100,000. This can be a very profitable way to trade, but it's important to fully understand the risks that are involved.
When you trade in futures, you have to pay exchange and brokerage fees. FOREX is commission free, a much better scenario and another FOREX pro. Currency trading occurs on a worldwide inter-bank market that lets buyers be matched with sellers in an instant. But even though you do not have to pay a commission charge to a broker to be matched up with a buyer or seller, the spread is usually larger than it is when you are trading futures. And the spread is where the brokerage makes their money.
For example, if you are trading a Japanese Yen/US Dollar pair, a FOREX trade would have about a 3 point spread (worth $30). Trading a JY futures trade would likely have a spread of only 1 point (worth $10), but you would also be charged the broker's commission on top of that. This price could be as low as $10 for self-directed online trading, or as high as $50 for full-service trading. However, this is generally all-inclusive pricing. It’s a good idea to compare both online FOREX and your specific futures commission charges to see which commission is the greater one.
This may seem complicated, and frankly, it is a bit. The FOREX market is a technical market, but if you are willing to take the time to understand the workings of the market as well as the FOREx pros and apply good trading discipline, you will realize substantial profits.
Just like futures and stock speculation, a FOREX trader has the ability to control a large amount of currency by putting up a small amount of margin. However, the margin requirements that are needed for trading futures are usually around 5% of the full value of the holding, or 50% of the total value if you are trading stocks. One of the FOREX pros is the margin requirements for FOREX are about 1%. For example, the margin required to trade foreign exchange is $1000 for every $100,000. This can be a very profitable way to trade, but it's important to fully understand the risks that are involved.
When you trade in futures, you have to pay exchange and brokerage fees. FOREX is commission free, a much better scenario and another FOREX pro. Currency trading occurs on a worldwide inter-bank market that lets buyers be matched with sellers in an instant. But even though you do not have to pay a commission charge to a broker to be matched up with a buyer or seller, the spread is usually larger than it is when you are trading futures. And the spread is where the brokerage makes their money.
For example, if you are trading a Japanese Yen/US Dollar pair, a FOREX trade would have about a 3 point spread (worth $30). Trading a JY futures trade would likely have a spread of only 1 point (worth $10), but you would also be charged the broker's commission on top of that. This price could be as low as $10 for self-directed online trading, or as high as $50 for full-service trading. However, this is generally all-inclusive pricing. It’s a good idea to compare both online FOREX and your specific futures commission charges to see which commission is the greater one.
This may seem complicated, and frankly, it is a bit. The FOREX market is a technical market, but if you are willing to take the time to understand the workings of the market as well as the FOREx pros and apply good trading discipline, you will realize substantial profits.
FINDING BROKER
It’s not always easy to know what to look for in a broker in any market, much less a market as complex as the FOREX. But, if you want to trade in FOREX you need a FOREX broker. While it might be tempting to simply ask the FOREX brokers what they can do for you, you can’t always depend on them to give you a straight answer. Here are a few things to consider when choosing your FOREX broker.
You will want a broker that has low spreads. Since FOREX brokers don't charge a commission, this difference is how they make money. Low spreads will save you money.
Along with this, you should be looking for a broker attached to a reputable institution.
Unlike equity brokers, FOREX brokers are usually attached to large banks or lending institutions. The broker should also be registered with the Futures Commission Merchant (FCM) as well as regulated by the Commodity Futures Trading Commission (CFTC).
Once you’ve narrowed your choices down to brokers that won’t cost you too much, and that are reputable, consider the trading tools that they are offering you. FOREX brokers have many different trading platforms for their clients, just like brokers in other markets. These often show real-time charts, technical analysis tools, real-time news and data, and may even offer support for the various trading systems.
Before you commit to any one broker, request free trials of their tools. Brokers generally provide technical as well as fundamental commentaries, economic calendars, and other research to help you make good trades. Shop around until you find a broker who will give you what you need to succeed.
The next item that you will need to evaluate carefully is the number of leverage options your potential broker has. Leverage is a necessity in FOREX trading because the price deviations in the currencies are set at fractions of a cent. Leverage is expressed as a ratio between the total capital that is available to be traded and your actual capital. For example, when you have a ratio of 100:1, your broker will lend you $100 for every $1 of actual capital you have. Many brokerage firms will offer you as much as 250:1. If you have low levels of capital you will need a brokerage with high levels of leverage to make reasonable profits.
If capital is not a problem, any FOREX broker that has a wide variety of leverage options would be a good choice for you. A variety of options will let you vary the amount of risk you choose to take. For example, less leverage (and therefore less risk) may be preferable if you are dealing with highly volatile (exotic) currency pairs.
Along with different levels of leverage, look for FOREX brokers that offer different types of accounts. Many brokers will offer you two or more types. The smallest account is known as a mini account and it requires you to trade with a minimum of around $300. The mini account also generally offers a high amount of leverage.
The standard account allows you to trade at a variety of different leverages, but it requires minimum initial capital of $2,000. And finally, there are premium accounts, which often require significant amounts of capital. They also generally have different levels of leverage available to the traders who use them, and often offer additional tools and services. You will need to make sure that the FOREX broker you choose has the right leverage, tools, and services for the amount of capital that you are able to work with.
You will want a broker that has low spreads. Since FOREX brokers don't charge a commission, this difference is how they make money. Low spreads will save you money.
Along with this, you should be looking for a broker attached to a reputable institution.
Unlike equity brokers, FOREX brokers are usually attached to large banks or lending institutions. The broker should also be registered with the Futures Commission Merchant (FCM) as well as regulated by the Commodity Futures Trading Commission (CFTC).
Once you’ve narrowed your choices down to brokers that won’t cost you too much, and that are reputable, consider the trading tools that they are offering you. FOREX brokers have many different trading platforms for their clients, just like brokers in other markets. These often show real-time charts, technical analysis tools, real-time news and data, and may even offer support for the various trading systems.
Before you commit to any one broker, request free trials of their tools. Brokers generally provide technical as well as fundamental commentaries, economic calendars, and other research to help you make good trades. Shop around until you find a broker who will give you what you need to succeed.
The next item that you will need to evaluate carefully is the number of leverage options your potential broker has. Leverage is a necessity in FOREX trading because the price deviations in the currencies are set at fractions of a cent. Leverage is expressed as a ratio between the total capital that is available to be traded and your actual capital. For example, when you have a ratio of 100:1, your broker will lend you $100 for every $1 of actual capital you have. Many brokerage firms will offer you as much as 250:1. If you have low levels of capital you will need a brokerage with high levels of leverage to make reasonable profits.
If capital is not a problem, any FOREX broker that has a wide variety of leverage options would be a good choice for you. A variety of options will let you vary the amount of risk you choose to take. For example, less leverage (and therefore less risk) may be preferable if you are dealing with highly volatile (exotic) currency pairs.
Along with different levels of leverage, look for FOREX brokers that offer different types of accounts. Many brokers will offer you two or more types. The smallest account is known as a mini account and it requires you to trade with a minimum of around $300. The mini account also generally offers a high amount of leverage.
The standard account allows you to trade at a variety of different leverages, but it requires minimum initial capital of $2,000. And finally, there are premium accounts, which often require significant amounts of capital. They also generally have different levels of leverage available to the traders who use them, and often offer additional tools and services. You will need to make sure that the FOREX broker you choose has the right leverage, tools, and services for the amount of capital that you are able to work with.
FOREX MARGIN
Any broker you consider will likely have a minimum account size, also known as FOREX account margins or initial margin available to traders. Once you have deposited your money into the account you will be able to begin trading. The broker will also stipulate how much equity they require per position, or lot, traded. Always make sure that you know how your FOREX account margin is going to work.
Read the margin agreement between you and your clearing firm carefully. Remember, a FOREX margin account is basically a loan. The margin agreement will describe how the interest on that loan is calculated, how you are responsible for repaying the loan, and how the securities you purchase serve as collateral for the loan. Carefully review the agreement to determine what notice, if any, your firm must give you before selling your securities to collect the money you have borrowed. Talk to your account representative if you have any questions.
Trading currencies on margin greatly increases your buying power. If you have $5,000 cash in a FOREX margin account that allows 100:1 leverage, you could purchase up to $500,000 worth of currency – because you only have to post 1% of the purchase price as collateral. This is particularly useful in the FOREX market, where traders work with small price changes to realize profits. But the FOREX market is a volatile market, and positions can quickly move against a trader. This is when the high margin rates can create spectacular losses.
If the market moves against you, the positions that you have in your account could be partially or completely liquidated if the available margin in your account falls below your maintenance level. Always remember that your broker may not berequired to make a margin call, and even if your agreement states that they do, they may not wait for you to respond to the call. Because of this, you should monitor your margin balance on a regular basis and utilize stop-loss orders on every open position to limit risk. With care, margin can be a powerful and lucrative tool. Used wisely, as part of a carefully thought out approach to trading, Forex account margins make the FOREX market work for small traders.
Read the margin agreement between you and your clearing firm carefully. Remember, a FOREX margin account is basically a loan. The margin agreement will describe how the interest on that loan is calculated, how you are responsible for repaying the loan, and how the securities you purchase serve as collateral for the loan. Carefully review the agreement to determine what notice, if any, your firm must give you before selling your securities to collect the money you have borrowed. Talk to your account representative if you have any questions.
Trading currencies on margin greatly increases your buying power. If you have $5,000 cash in a FOREX margin account that allows 100:1 leverage, you could purchase up to $500,000 worth of currency – because you only have to post 1% of the purchase price as collateral. This is particularly useful in the FOREX market, where traders work with small price changes to realize profits. But the FOREX market is a volatile market, and positions can quickly move against a trader. This is when the high margin rates can create spectacular losses.
If the market moves against you, the positions that you have in your account could be partially or completely liquidated if the available margin in your account falls below your maintenance level. Always remember that your broker may not berequired to make a margin call, and even if your agreement states that they do, they may not wait for you to respond to the call. Because of this, you should monitor your margin balance on a regular basis and utilize stop-loss orders on every open position to limit risk. With care, margin can be a powerful and lucrative tool. Used wisely, as part of a carefully thought out approach to trading, Forex account margins make the FOREX market work for small traders.
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